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Brussels, 03 May 2004

Commission opens proceedings into collective licensing of music copyrights for online use

The European Commission has warned sixteen organisations that collect royalties on behalf of music authors¹ that their so-called Santiago agreement is potentially in breach of European Union competition rules. This is because the cross-licensing arrangements that the collecting societies have between themselves lead to an effective lock up of national territories, transposing into the Internet the national monopolies the societies have traditionally held in the offline world. The Commission believes that there should be competition between collecting societies to the benefit of companies that offer music on the Internet and to consumers that listen to it. This position reflects only a preliminary position of the Commission at this stage and the collecting societies have the right to defend their views in writing and at an oral hearing.

The Santiago Agreement was notified to the Commission in April 2001 by the collecting societies of the UK (PRS), France (SACEM), Germany (GEMA) and the Netherlands (BUMA), which were subsequently joined by all societies in the European Economic Area (except for the Portuguese society SPA) as well as by the Swiss society (SUISA).

The purpose of the agreement is to allow each of the participating societies to grant to online commercial users "one-stop shop" copyright licenses which include the music repertoires of all societies and which are valid in all their territories.

The loss of territoriality brought about by the Internet, as well as the digital format of products such as music files, are difficult to reconcile with traditional copyright licensing schemes which are based on purely national procedures. Once uploaded onto the Internet, a musical work will be accessible from virtually anywhere in the world. The traditional licensing framework would require a commercial user wishing to offer to its clients such musical work to obtain a copyright license from every single relevant national society. The Santiago Agreement therefore seeks to adapt the traditional framework to the online world by envisaging the possibility of "one-stop" licenses allowing for the provision of legitimate services such as music "downloading" or "streaming".

The Commission strongly supports the "one-stop shop" principle for online licensing enshrined in the Santiago Agreement and fully acknowledges the need to ensure adequate copyright protection and enforcement, as clearly expressed in the Commission Decision of 8.10.2002 concerning the IFPI Simulcasting case².

However, the Commission also considers that such crucial developments in online-related activities must be accompanied by an increasing freedom of choice by consumers and commercial users throughout Europe as regards their service providers, such as to achieve a genuine European single market.

The structure put in place by the parties to the Santiago Agreement results in commercial users being limited in their choice to the monopolistic collecting society established in their own Member State.

Recent history in the field of collective management of copyrights shows that the traditional monopolistic structure which has so far existed in Europe at national level is not required in order to safeguard the interests of right-holders in the online world. The Commission exempted in 2002 the IFPI Simulcasting agreement which established pan-European licensing without imposing territorial exclusivity. In this case, TV and radio broadcasters will be able to get a license from any of the collecting societies located in the EEA in order to simultaneously transmit their music broadcasts via the Internet. The freedom of choice at the disposal of broadcasters means that they will be able to choose the most efficient society in Europe for the delivery of the license. Furthermore, the record producers' collecting societies also announced in 2003 the conclusion of a standard agreement for the purposes of Webcasting³ licensing, pursuant to which commercial users will similarly enjoy freedom of choice as regards the licensor society in Europe.

The lack of competition between national collecting societies in Europe hampers the achievement of a genuine single market in the field of copyright management services and may result in unjustified inefficiencies as regards the offer of online music services, to the ultimate detriment of consumers. The Commission considers that the territorial exclusivity afforded by the Santiago Agreement to each of the participating societies is not justified by technical reasons and is irreconcilable with the world-wide reach of the Internet.

The Commission will examine carefully and with an open mind any proposals that the collecting societies may submit to render the current arrangements compatible with European competition law. The sending of a Statement of Objections does not prejudge the final outcome of the investigation and respects the rights of the notifying parties and other interested parties to be heard.

The collecting societies have two and a half months to reply to the Commission's objections. They can also request a hearing at which it would be able to submit their arguments directly to the representatives of the national competition authorities.

    ¹  Music authors are lyrics writers and music composers NOT the recording companies, which have their own collecting societies

    ² The IFPI Simulcasting concerned the collecting societies of the recording companies and the simultaneous broadcasting by TV and radio operators via the traditional way (hertzian wave, cable, satellite, etc) as well as the Internet. See Press Release IP/02/1436 of 08 October 2002, case COMP/C2/38.014 IFPI Simulcasting, decision of 8 October 2002, OJ L107 (30.04.2003) p. 58.

    ³ Webcasting is the broadcasting of TV/radio programmes via the Internet only

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